Higher fees for retailers; new charges for fantasy sports

HARTFORD — Retailers would have to pay higher license costs and daily fantasy sports companies would be charged hefty new fees under legislation approved Thursday by the Democratic majority in the General Assembly’s tax-writing committee.

Like the budget that passed the day before in the budget-setting Appropriations Committee, the tax package only addresses a $570 million deficit in the fiscal year that starts July 1, but not the recent projection that the red ink totals $930 million or more. Republicans on the Finance, Revenue & Bonding Committee on Thursday blasted the tax plan for not solving the state’s fiscal challenges, while raising fees in a wide range of areas.

“I am very concerned about our tax base and its ability to continue to keep up with the ever-increasing cost of state government in general and in specific areas as well,” said Sen. L. Scott Frantz, R-Greenwich, ranking member of the committee.

The bill is based on the January revenue estimates, upon which Gov. Dannel P. Malloy presented his budget adjustments to the General Assembly in February. Malloy plans to offer a new proposal addressing the higher deficit next week, while the next revenue estimates are due after April 18.

While the committee approval, in a partisan 30-21 vote, sends the tax plan to the House of Representatives, it will effectively join the spending package for upcoming closed-door negotiations between legislative leaders and the governor.

Currently, all retailers pay $100 every five years to obtain permits to charge sales taxes. The new plan would charge higher prices for companies that generate more revenue. The three-tier system would charge smaller retailers $50, medium-sized firms $100 and bigger retailers $350. Licenses would be renewed every two years.

“I think you’re going to have screaming banshees on your hands because it feels like a nail in the coffin,” predicted Sen. Michael A. McLachlan, R-Danbury, on the new tiers of sales-tax fees. “Just about everybody in business is going to be paying the bigger fee of $350.”

The new tax on fantasy sports companies such as DraftKings and FanDuel, was billed by committee leaders as an attempt to protect contest players from deceptive practices, including the protection of entry fees and the prohibition of players under age 18. It would require the company to pay $50,000 entry fees and an 8.75 percent surcharge on the total fees collected by operators. Smaller companies would pay lower amounts.

The legislation, expected to generate $9.5 million a year, excuses daily fantasy sports from the definition of “gambling.” About 600,000 state residents are estimated to participate in fantasy sports.

Griffin Finan, director of public affairs for the Boston-based DraftKings, voiced opposition to the legislation.
“We support legislation that confirms that fantasy sports contests are legal and embrace thoughtful and appropriate consumer protections,” Finan said. “We are opposed to a tax on our customers’ entry fees. This is not the time for a new tax on the fantasy sports fans in Connecticut.”

“Taxing the 600,000 fantasy players in Connecticut isn’t the right answer,” said Cory Fox, FanDuel’s counsel for policy and government affairs. “Players should be protected with firm consumer protection regulations fantasy companies must adhere to — they shouldn’t be taxed. Nearly 30 states are advancing legislation to protect fantasy play, and Connecticut is the only state proposing to tax players in this way.”

“Are we endorsing fantasy sports?” asked Sen. Toni Boucher, R-Wilton, a committee member, who said that the complete list of larger fees are essentially higher taxes on state residents on many levels. “It appears that we have a lot of broken promises here.”